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City link verdict is … not guilty!

The directors of the failed courier company City Link had a good reason to celebrate this weekend after the dismissal of criminal charges brought against them for failing to notify the Department for Business, Innovation and Skills (“BIS”) of their intention to make City Link’s circa 2,500 employees redundant last Christmas.

As explained in an earlier blog by our employment colleagues (Turkeys come home to roost for City Link directors after Christmas redundancies), it is a criminal offence to fail to notify BIS of the redundancy of 20 or more employees at one establishment within a 90-day period. In an insolvency situation it is very rare for such notification to be given because alerting people to a company’s financial predicament could have the detrimental effect of bringing forward an insolvency which might otherwise be avoided.

In acquitting the directors, the Judge noted that the directors had every hope of saving the company and the livelihood of its workforce by placing the company into administration and that it had been the administrators and not the directors who had made the workforce redundant. The Judge made it quite clear that he had arrived at his decision based upon the facts of the case and that his decision did not create a general principle for administrations.

All eyes are now on the prosecutions arising from the administration of fashion retailer USC. The director, David Forsey, the former chief executive of Sports Direct, and the administrator face similar charges for failing to notify BIS of the proposed redundancies. It is the first time an insolvency practitioner has been prosecuted for this offence. USC went into administration in January this year and 200 warehouse staff in Scotland were only given 15 minutes notice of losing their jobs. The USC case is due to be heard in March 2016. For further details of the criminal proceedings which have been brought in the USC case please see our earlier blog Consult in UK redundancies or be fined….

It remains to be seen whether the outcome of the City Link case will deter BIS from pursing directors of insolvent companies for failing to notify them of redundancies. To date they have offered no explanation to justify their change in policy. However, it is anticipated that there will be further developments in this area. Not only is there the outcome of the USC trial but we are also still awaiting the outcome of the March 2015 BIS Call for Evidence on Collective Redundancy Consultation for Employers Facing Insolvency which closed in June this year which recognised the need for reform.

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